What Is the Difference Between a USDA Loan & a FHA Loan?

USDA home loans usually are restricted to rural areas.

USDA Loans

Under USDA rural home loans, very low- and low-income rural Americans can qualify for several loan, grant and loan-guarantee programs. USDA home-loan terms run from 30 to 38 years. Additionally, USDA home loans can be guaranteed and can feature 100-percent financing. Income and credit qualification standards under USDA loan programs vary but are geared toward low-income buyers. Homes bought using USDA loans must be modest in design, size and cost.

FHA Loans

There are no geographic area restrictions when it comes to FHA-insured home loans. FHA loan limits vary depending on region and location in the country, and FHA offers only insured, not guaranteed, loans. FHA income and credit qualification standards can be slightly higher than their USDA counterparts. Minimum down payment requirements

of at least 3.5 percent apply to FHA-insured home loans; however, down payments can be a gift from parents, for example.